Construction Industry Petitions National Assembly to Withdraw 'Retained Earnings Tax Introduction'

[Asia Economy Reporter Yoo In-ho] The construction industry has urged the National Assembly to withdraw the introduction of the retained earnings tax.

The Korea Federation of Construction Associations announced on the 23rd that it submitted a joint petition signed by 16 construction-related organizations regarding the government's proposed tax law amendment on "taxation of excess retained earnings of personal quasi-corporations" to the policy committees of the Democratic Party and the People Power Party.

The government had previously submitted a revision of the Restriction of Special Taxation Act to the National Assembly, which stipulates that personal quasi-corporations (companies where the family of the business owner holds more than 80% of shares) holding retained earnings exceeding a certain level without active business activities will be taxed as dividends.

In the petition, the Korea Federation of Construction Associations argued that the introduction of the retained earnings tax is an "anti-market regulation," stating, "Regardless of the intent, even companies conducting normal business activities are suffering unintended damage."

They further explained that, unlike the requirements for establishing a stock company under the Commercial Act, the construction industry requires registration standards that meet capital requirements of KRW 350 million to 850 million for general contractors and KRW 150 million for specialized contractors, making it unrelated to single-shareholder corporations created to evade income tax.

Additionally, they added that the accumulation of retained earnings within companies is inevitable due to costs such as land purchases and material procurement for housing and real estate projects, and that small and medium-sized construction companies accumulate retained earnings by improving financial ratios to gain advantages in public construction bidding.

This content was produced with the assistance of AI translation services.